Accused Petaluma Ponzi schemer pleads not guilty to charges
Published: Friday, June 15, 2012 at 1:14 p.m.
Last Modified: Friday, June 15, 2012 at 1:14 p.m.
The Petaluma man charged with bilking investors in a $20 million Ponzi scheme started out as a small-town real estate developer with a knack for putting deals together.
Aldo Baccala got projects rolling with private money rather than bank funding and gained a reputation for turning a profit, said Greg Phillips, an investigator from the Sonoma County district attorney, in a court declaration.
By the 1990s, Baccala had formed partnerships that bought medical office buildings and nursing homes in two southeastern states. He expanded his portfolio to include a Nevada car wash, a Colusa mushroom farm and a mobile home lending firm.
“Over time, as word spread, Baccala cultivated a large number of people who invested with him and made money in his projects,” said Phillips in a declaration leading to Baccala's June 5 arrest.
Eventually, Baccala had so many projects and so many investors that he began issuing high-interest promissory notes, often secured by non-existent trust deeds, Phillips said.
Instead of rolling the money over into investments, it went elsewhere, including to pay off other lenders, creating what Phillips described as “a vast Ponzi scheme.”
At the same time, Baccala kept up interest payments of 12 percent while making high-risk stock market investments, losing $8 million from 2003-2008.
By November 2008, his money was gone. Baccala sent out notices to investors that he would cease making interest payments.
“Baccala's success also sowed the seeds of his downfall,” Phillips wrote.
Baccala, 71, pleaded not guilty Friday to a 164-count felony complaint alleging securities fraud, grand theft and elder financial abuse. He faces a maximum of 148 years in prison if convicted.
He remains in custody with a bail of $2 million.
His lawyer requested more time to review documents in a complex scheme investigators said stretched from 2004-2008. Judge Rene Chouteau ordered both side to return Aug. 9.
“I have 9,000 pages of documents and I'm told there are additional boxes to look through,” attorney Steve Gallenson said outside court.
Asked if Baccala had any of the money left, Gallenson said “my understanding is he's living on Social Security.”
A group of 75 investors sued Baccala in civil court, leading to a $21 million settlement in 2009. To date, however, the plaintiffs have been unsuccessful in their demands for the return of their principal, Phillips said.
Prosecutors, including a lawyer from the state Attorney General's office, declined to comment outside court.
Baccala, the son of Sonoma County store owners, became a real estate agent in 1978.
Phillips said the district attorney's office began investigating him in January 2009 after receiving numerous complaints of fraud connected to real estate investments. Some allegations came from people over 65, he said.
He uncovered Baccala's six “investment offerings” including nursing homes in the Carolinas, a firm called Premier Capital Lending and the Nevada Car Wash Group based in Henderson, Nev. Dozens of investors plunked down anywhere from $25,000 to more than $2 million with the understanding the money would go to real estate construction and yield a high return, Phillips said.
In many cases, the work was never done and Baccala promised to roll the money into subsequent investments. For example, Baccala collected $3.1 million for construction of the car wash, which was sold in 2007. None of the investors were repaid and many agreed to roll their money into other investments without a pay out, Phillips said.
As the strain on Baccala's finances increased, he sought bigger loans at interest rates over 27 percent — without disclosing his precarious situation. In fact, no single investor had knowledge of Baccala's business web, the number of notes he had issued or the extent of his stock losses, Phillips said.
“With Baccala's substantial history of paying on his notes, (lenders) had no reason to suspect that the security he offered for his investments was non-existent or that he was continually rolling over millions of dollars,” Phillips wrote.
One of his alleged victims appeared in court Friday. Maribel Chin said she and her husband Edward lost much of their retirement savings. She said she doesn't expect to get any back but hopes Baccala will be brought to justice.
“We're just working people,” she said outside court.
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